Turbotax is at odds with IRS regulations. IRS says wife can use husbands income as basis for IRA contribution. Turbotax rejects this. How can I get Turbotax to comply?

[DanaB27]

Please be aware that you can only contribute to an IRA if you or your husband had taxable compensation (wages, salary, self-employment income).

For 2021, 2020 and 2019, the total contributions you make each year to all of your traditional IRAs  and Roth IRAs can't be more than:

• $6,000 ($7,000 if you're age 50 or older), or
• If less, your taxable compensation for the year

Also, be aware that the deduction to a traditional IRA may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels. Please see IRA deduction limits. And Roth IRA contribution may be limited based on your filing status and income. Please see 2020 - Amount of Roth IRA Contributions You Can Make for 2020.

To enter IRA contributions:

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type “IRA contributions”
3. Click on “Jump to IRA contributions"

If this doesn't help you issue please provide more details about your error.

[dmertz]

DanaB27's reply fails to list the restriction that trips up most people who ask this question on this forum.  Only the spouse with the lower compensation is eligible to use the other spouse's compensation to support their IRA contribution.

One other restriction that DanaB27's reply fails to mention with respect to spousal contributions is that the spouses must file jointly.

Each spouse's contribution must be made to that spouse's own IRA.  Make sure that each spouse's contribution is entered separately.

[czech]

Here's the problem: I have enough earned income to provide for two IRA contributions ($14K, since we are over 50). My wife is disabled and has no earned income. Turbotax reports the error: "You are not allowed to deduct an IRA contribution because your income is 0". Turbotax removes my wife's contribution from our return and increases our AGI by $7K.

[dmertz]

Since your post indicates that you are using TurboTax Premier Online, I'll assume that you are not self-employed.  The amount of compensation available to support IRA contributions is the amount in box 1 of your W-2 minus any amount in box 11 (also reduced by any amount of this compensation that is excluded as foreign-earned).

[czech]

I think you are not paying attention. My earned income in box 1 of my W2 is sufficient to support $14K in IRA contributions. I have no foreign income. I am using Turbotax Premier Online only because I have capital gains and losses. According to the IRS: "If you file a joint return, you may be able to contribute to an IRA even if you didn’t have taxable compensation as long as your spouse did." Turbotax still reports the error stated previously that my wife cannot deduct an IRA contribution because she has no income.

[dmertz]

I'm simply listing reasons that people commonly overlook when determining the compensation available to support a spousal IRA contribution since these were not previously addressed in this thread.

My testing of the current release of 2020 TurboTax indicated that it operates properly with respect to determining the permissible spousal IRA contribution.  I suggest deleting and reentering the W-2.

[czech]

OK. Deleted the W-2. My income levels are not enough to invalidate any IRA deduction. Re-entered all the data from my W-2 manually. Turbotax still reports the error:

Traditional IRAs offer some great benefits, but they have restrictions too.

"Your wife" is not permitted to contribute more than the amount of your earned income. Learn More

Your traditional IRA contribution of $7000 is more than your earned income of zero. The difference of $7000 is considered an excess contribution. What can I do?

This is not OK. And this is not my fault or error. Stop making it out as though I have done something wrong.

[macuser_22]

Look at the IRA Deduction Worksheet  (Print all forms ans worksheets) and see what is on lines 2 3 & 4 for you and spouse.

Here is an example:

[czech]

No idea on how to print or view IRA deduction worksheets - aside from paying the fee for my return and getting the output ready to file. I did see a tabulation of "IRA Contribution Results" which reads as follows: There are three rows and two columns in this table. Column one is "Total Contribution", column two is "Amount Deductible". Under column one, I see both IRA contributions included. Only one in Column two. Then column one has "Less: excess traditional IRA contributions" where it deducts the second contribution. Same for the Roth (we have both). Then it assess me a tax on the "excess contributions". Hence, I am sure the contributions for my wife are zeroed out on the IRA deduction worksheet. Or perhaps they are not zeroed out - just disallowed and penalized.

[Anonymous]

You got a bonus for me.  Champ MacUser_22 printed out the worksheet for you.  I can see from that that TurboTax was not adding my self-employment income to my W-2 income and therefore allowing only the amount on my W-2 for my contribution.  I was having trouble with the self-employment health insurance deduction with another program, so came over to TurboTax and encountered the error for the contributions.  It seems like there's a glitch on this worksheet, or both of us are doing something wrong.  I went back to the other program and got my problem with the SE health insurance solved because this year those people are answering the phone, at least so far.

[macuser_22]

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@Anonymous wrote:

You got a bonus for me.  Champ MacUser_22 printed out the worksheet for you.  I can see from that that TurboTax was not adding my self-employment income to my W-2 income and therefore allowing only the amount on my W-2 for my contribution.  I was having trouble with the self-employment health insurance deduction with another program, so came over to TurboTax and encountered the error for the contributions.  It seems like there's a glitch on this worksheet, or both of us are doing something wrong.  I went back to the other program and got my problem with the SE health insurance solved because this year those people are answering the phone, at least so far.

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Your total income for IRA contribution on that worksheet comes form both the W-2 and the 1040 form Schedule 1 line 3 minus Schedule 1 line 14.   Schedule 1 line 3 comes form the Schedule C line 31.

[dmertz]

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Your total income for IRA contribution on that worksheet comes form both the W-2 and the 1040 form Schedule 1 line 3 minus Schedule 1 line 14.

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Actually, reduced by Schedule 1 line 15 as well.

[Xavier91]

This question was still not answered to why TT keeps screwing this up.   I'm in a similar situation.  I retired a few years early so no SSI.  My spouse sill works and makes over 14k/year.  I think TT screwed me in 2021 because it told me I couldn't make a 2nd $7000 contribution.  FIX THIS TURBOTAX!!! 

Copied from IRS link (search for Kay Bailey Hutchinson Spousal IRA limit).  TT forum here cuts off part of the link below:

Kay Bailey Hutchison Spousal IRA Limit

For 2021, if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following two amounts.

1. $6,000 ($7,000 if you are age 50 or older).

2. The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts.

   1. Your spouse's IRA contribution for the year to a traditional IRA.

   2. Any contributions for the year to a Roth IRA on behalf of your spouse.

This means that the total combined contributions that can be made for the year to your IRA and your spouse's IRA can be as much as $12,000 ($13,000 if only one of you is age 50 or older, or $14,000 if both of you are age 50 or older).

Note.

 

This traditional IRA limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions).

Example.

 

Kristin, a full-time student with no taxable compensation, marries Carl during the year. Neither of them was age 50 by the end of 2021. For the year, Carl has taxable compensation of $30,000. He plans to contribute (and deduct) $6,000 to a traditional IRA. If he and Kristin file a joint return, each can contribute $6,000 to a traditional IRA. This is because Kristin, who has no compensation, can add Carl's compensation, reduced by the amount of his IRA contribution ($30,000 − $6,000 = $24,000), to her own compensation (-0-) to figure her maximum contribution to a traditional IRA. In her case, $6,000 is her contribution limit, because $6,000 is less than $24,000 (her compensation for purposes of figuring her contribution limit).

Filing Status

Generally, except as discussed earlier under Kay Bailey Hutchison Spousal IRA Limit, your filing status has no effect on the amount of allowable contributions to your traditional IRA. However, if during the year either you or your spouse was covered by a retirement plan at work, your deduction may be reduced or eliminated, depending on your filing status and income. See How Much Can You Deduct, later.

Example.

 

Tom and Darcy are married and both are 53. They both work and each has a traditional IRA. Tom earned $3,800 and Darcy earned $48,000 in 2021. Because of the Kay Bailey Hutchison Spousal IRA limit rule, even though Tom earned less than $7,000, they can contribute up to $7,000 to his IRA for 2021 if they file a joint return. They can contribute up to $7,000 to Darcy's IRA. If they file separate returns, the amount that can be contributed to Tom's IRA is limited by his earned income, $3,800.

[NCperson]

@Xavier91 - if we can get beyond the ranting, this COmmunity may be able to help, but we need a better understanding of what occured - without the emotion.

1) did you make an IRA contribution that you believe TT didn't give you the deduction for?

or

2) did you not even make the contribution in 2021?  if not, why the ranting?